Page Tools

Reserve Bank governor Ian Macfarlane has sharply rejected
criticism of the Reserve's credit card reforms, and hinted that it
is likely to extend re-regulation to electronic funds transfer at
point of sale and automated teller machine interchange fees.

In a feisty session with the House of Representatives Economics
Committee, Mr Macfarlane came under bipartisan attack from MPs
claiming the reforms had delivered no benefits.

Committee chairman Bruce Baird said the committee had heard
evidence that the reforms have failed to cut user costs, but had
led to cuts in frequent flyer benefits and a shift of users from
Visa and Mastercard to Amex and Diners Club.

Mr Macfarlane said the Reserve had estimated the reforms had
delivered savings of $580 million to merchants through lower fees,
and a net $400 million to card users.

He said the reforms had opened the way for the lower-cost cards
issued by Virgin, Wizard, Aussie Home Loans and others, offering
far cheaper credit for the two-thirds of card users who do not
clear their debts every month.

"It's going to have the effect of reducing the cost of borrowing
in Australia", he told MPs. "If that's a distortion, then we're
going to plead guilty to that.

"The whole point of the exercise was to empower the merchant, to
give them bargaining power to use against the card issuers."

Mr Macfarlane said many merchants have yet to use that power,
because they feel helpless against the power of card issuers. But
he said Coles Myer and Woolworths have negotiated big reductions in
Amex fees, and other retailers can do the same.

Amex and Diners Club have increased their share only from 10.5
per cent of the market to 12 per cent, he said.

While the Reserve has yet to decide on regulating Eftpos fees,
Mr Macfarlane implied that it should.

"It costs the issuer money to issue an Eftpos card, whereas they
receive a lot of money when they issue a credit card," he said. "If
we do not do something about that, in the long run we will not have
an Eftpos system."

Assistant governor Philip Lowe hinted that re-regulation could
also be needed on ATM interchange fees, where the industry had
failed to agree on reforms.

"We are having discussions to see whether there is room for a
consensus model to emerge, and if not, what the Reserve Bank should
do about that," he said.